Dustin Semach
Interim Co-President and Co- Chief Executive Officer, Chief Financial Officer at Sealed Air
Thank you, Emile, and good morning, everyone. Moving to the fourth quarter and full year results, let's turn to Slide 5. Net sales were $1.4 billion in the quarter flat on a constant currency basis and were $5.5 billion for the full year of 2023, down 1% at constant currency. Adjusted EBITDA in the quarter was $274 million, down 8% compared to last year. For the year, adjusted EBITDA was approximately $1.1 billion, down 9%. Volumes have improved sequentially in Q4 as holiday demand drove a low-single-digit seasonality pickup.
As reported, adjusted earnings per share in the quarter of $0.88 were down 11% compared to a year ago. Our adjusted tax rate was 18% compared to 26.1% in the same period last year, driven by one-time benefits due to the reversal of liabilities related to uncertain tax positions. We did not repurchase any shares in the quarter. Our weighted average diluted shares outstanding in the fourth quarter of 2023 was $144.9 million. For the year, adjusted earnings per share of $3.18 was down 22%, primarily driven by lower adjusted EBITDA and higher interest expense, partially offset by lower tax expense.
Turning to Slide 6. In Q4, Liquibox contributed 5% to total company sales or approximately $70 million, but was offset by lower pricing in Protective and lower volume in both businesses. The volume declines were driven by continued market pressures in Protective, lower automation sales as well as continued weakness in food, retail end markets.
Fourth quarter adjusted EBITDA of $274 million, which included $15 million contribution from Liquibox, decreased $23 million or approximately 8% compared to last year with margins of 19.9%, down 120 basis points. This performance was mainly driven by lower volumes within both segments, offset by contributions from Liquibox.
Moving to Slide 7. In the fourth quarter, food net sales of $893 million were down 3% on an organic basis, primarily due to the volume declines driven by lower automation sales as customers enforced tighter controls on capital expenditures and by continued weakness in retail demand. Food adjusted EBITDA of $195 million in the fourth quarter was down 3% with margins at 21.8%, down 130 basis points compared to last year. The decrease in adjusted EBITDA was mainly driven by higher operating cost and lower volumes, partially offset by contributions from Liquibox and favorable net price realization of $10 million.
Protective fourth quarter net sales of $485 million were down 10% organically, driven by lower pricing and volume declines in Americas and EMEA from continued market pressures in the industrial and fulfillment markets. Protective adjusted EBITDA of approximately $90 million was down 12% in the fourth quarter with margins at 18.7%, down 50 basis points. The decrease in adjusted EBITDA was driven by unfavorable net price realizations and lower volumes, partially offset by favorable productivity benefits.
On Slide 8, we review our fourth quarter net sales by segment and by region. In constant dollars, net sales were flat with 5% growth in Food, mainly driven by the Liquibox acquisition, while Protective was down 10% due to weak end market demand. By region, Asia-Pac grew 5% organically driven by a strong Australian cattle cycle. Americas was down 6% due to lower automation sales, a weak US cattle cycle and lower pricing in Protective. EMEA declined 11% on challenging market conditions across both segments and continued destocking within Protective. In constant dollars, full year net sales were up 9% in Food, while Protective was down 15%. By region, we were up 3% in Asia-Pac, offset by declines of 2% in Americas and 1% in EMEA.
Now let's turn to free cash flow and leverage on Slide 9. Through the fourth quarter, excluding the impact of the payments and deposits related to the resolution of certain prior tax matters, free cash flow was $467 million compared to $376 million in the same period a year ago, representing an increase of 24% year-over-year. The primary driver of this improvement was significant inventory reduction, partially offset by lower earnings and higher interest cost. Since the peak in the second quarter of 2023, we have reduced total debt by approximately $280 million, exiting the year with a net leverage ratio of 3.9 times, down from 4.1 times in the third quarter. Our total liquidity position was $1.3 billion, including $346 million in cash and the remaining amount in committed and fully undrawn revolver. We will continue to focus on driving net debt to adjusted EBITDA to below 3.5 times over the next two years.
Let's turn to Slide 10 to review our 2024 outlook. We expect an L-shaped recovery through 2024 and into 2025. As a result, we expect net sales to be in the range of $5.2 billion to $5.6 billion, which at the midpoint assumes a 2% decline in organic growth with flat volume growth offset by negative pricing. Portfolio exits represent 0.5% lower volume in both segments.
While the global protein end markets continue to be challenged, our food volume is expected to grow approximately 1%, driven by competitive wins in our core businesses, momentum in our fluids and liquids businesses including Liquibox and our new product launches offset by price declines of 2%. Our work on integration and operational momentum at Liquibox is taking hold and we expect the business to continue to improve across 2024 further supported by a positive outlook for the food service end markets.
We see a slower market recovery in Protective than previously anticipated with a full year volume decline of approximately 1%. Pricing pressures have increased further reducing top line by 3% as the competitive landscape has intensified in a lower volume environment. Protective volumes are expected to recover toward the end of 2024 as our new commercial model gains traction and market dynamics improve. We expect full year adjusted EBITDA to be in the range of $1.05 billion to $1.15 billion, which assumes adjusted EBITDA margin of approximately 20% at the midpoint. This outlook is lower than our soft guide provided during our Q3 earnings call, mainly driven by lower volume expectations.
We anticipate continued softness in the first half of 2024 as volume reaches the trough and gradually improves as the market conditions and seasonality improve in the second half. We remain disciplined to drive the necessary cost actions to offset further volume weakness.
The midpoint of our adjusted EBITDA guidance is in line with 2023 with $90 million year-over-year cost savings offsetting flattish overall volumes, negative net price realization and restoring bonus pools. Full year adjusted EPS is expected to be in the range of $2.65 to $3.05 per share. The lower 2024 adjusted EPS is largely driven by higher depreciation, interest and tax expense with an assumed tax rate of 26% to 27%.
We expect full year 2024 free cash flow in the range of $325 million to $425 million. At the midpoint, our free cash flow conversion as a percent of adjusted net earnings is expected to be 90%. We are assuming approximately $80 million in restructuring charges and approximately $20 million incremental cash interest payments, offset by favorable working capital of roughly $30 million.
Lastly, for the first quarter of 2024, we expect net sales and adjusted EBITDA to be ranged around $1.3 billion and $240 million, respectively, with earnings per share between $0.50 and $0.60. Our ranges and outlook reflect the dynamic environment we continue to operate in. As we gain more visibility throughout the year, we will be able to adjust and update expectations accordingly.
Turning to Slide 11, we closed out the year in line with our expectations and remain committed to executing against our Cost Take-Out to Grow efforts. While our expectation for 2024 has reduced to a weaker and longer recovery period for our end markets, we are encouraged by the feedback from our customers and our distributors that destocking is largely behind us and are more confident in a second half modest recovery in volumes.
We are focused on driving a transformation at SEE in 2024, improving commercial execution and restoring business fundamentals. We expect 2025 to be the year we return to a normal growth trajectory and where our cost reduction and operational excellence initiatives will position us well to return to adjusted EBITDA growth in 2025 and beyond.
Lastly, I'd like to close by thanking the global SEE team who are at the center of our transformation for their efforts solving our customers' most critical packaging challenges day in and day out.
With that, Emile and I look forward to your questions. Operator, we would like to begin the Q&A session.
